VANCOUVER — Drivers in British Columbia should brace for record high gasoline prices this summer and the financial pain has the potential to spread across the country, says a petroleum industry analyst.

Dan McTeague of the online tech company GasBuddy predicts that beginning in April and continuing to September, gasoline prices across much of B.C.’s south coast will hover around $1.60 a litre.

He blames the hike on high demand and chronically short supply, made even worse by Friday’s announcement that the Olympic pipeline that distributes gasoline throughout Washington and Oregon will be taken off-line for four or five days of maintenance.

Prices across Vancouver hit about $1.55 over the weekend, while Victoria remained around $1.40, but McTeague warns southern Vancouver Island could see an eight-cent-a-litre leap as the ripple from short supplies and climbing local taxes spreads.

The high for a litre of gasoline in Metro Vancouver was set on June 22, 2014, when the price was just under $1.56.

McTeague said some analysts fear higher prices will spread east.

“People are shaking their heads,” he said. “It’s become quite the story, with some national overtones.”

McTeague said other parts of the country are not looking at the same prices for gas, particularly because of B.C.’s taxes on gas.

“It’s not quite the same thing, you are not dealing with 50-cent-a-litre taxes and you are not dealing with a shortage in the same way Vancouver is experiencing,” he said. “But it does suggest, I think, the likelihood of breaking the all-time record in Vancouver will likely happen this week.”

In other parts of the country on Monday, the average price for gas was just under $1.14 a litre in Edmonton, about $1.25 in Toronto and around $1.12 in Halifax.

Kinder Morgan’s Trans Mountain pipeline supplies about 50 per cent of the gasoline for B.C.’s south coast, but McTeague says it is already congested and can’t meet the region’s demand.

The expected lengthy maintenance shutdown of the Parkland refinery, which McTeague said carries 25 per cent of the Vancouver-area’s gasoline, has further crimped supply, while the low dollar adds to the expense of topping up from Washington state refineries.

“By any stretch or by any measure, the price you are paying in Vancouver is, for most people, prohibitive,” said McTeague.

Los Angeles is the other city in North America where gas prices are unusually high, selling at $3.50 a gallon. But McTeague said even when the exchange rate and other factors are calculated, B.C. drivers would pay about $5.00 for a gallon.

Cenovus Energy Inc is seeking a partner to fund C$1.3 billion in costs to build the supporting infrastructure at its Narrows Lake oil sands project in Alberta, people familiar with the matter said on Friday.

Cenovus has been seeking to raise billions to support its projects and reduce its debt burden after its pent C$17 billion on acquiring oil sands and natural gas assets from ConocoPhillips last year.

Cenovus earlier this month hired Credit Suisse and RBC Capital Markets as advisers on the Narrows Lake infrastructure fundraising, the people said, declining to be named as the process is private.

Authorities in British Columbia arrested anti-pipeline protesters Saturday on Burnaby Mountain, a first in a string of actions demonstrators said they have planned for the coming week.

Amina Moustaqim-Barrette, who spoke on behalf of a coalition of demonstrators under the banner Protect the Inlet, said each protester was ready to be arrested to send a clear message against Kinder Morgan’s Trans Mountain pipeline expansion project.

“The community isn’t going to lay down and just accept that this pipeline is going to be built,” she said. “They’re going to show their opposition very loudly and very purposefully.”

Twenty-eight demonstrators began blocking the entrance to Kinder Morgan’s work site at about 10 a.m. PT Saturday. Four hours later, some of the protesters tied themselves to the gate using zip ties, Moustaqim-Barrette said.

Burnaby RCMP moved in soon after, reading out a B.C. Supreme Court injunction granted Thursday to Kinder Morgan, she said. The injunction restricts protesters from entering within five metres of two terminal work sites.

Moustaqim-Barrette said all 28 demonstrators had been arrested by Saturday evening after what she described as a “very peaceful” demonstration.

“Everyone was very aware of the situation, of the possibility of arrest. And everyone was given the chance at any time during the day to leave that zone and not be arrested,” said Moustaqim-Barrette, who is also communications co-ordinator for environmental organization 350.org.

She said there are similar actions planned for each day starting Monday, which will involve Indigenous leaders, politicians, celebrities and grassroots volunteers.

Officials with Burnaby RCMP were not available for comment Saturday, but the police service said Friday they wanted to remind the public that they are not an interested party in the pipeline debate and are there to ensure everyone’s safety.

Canada’s natural resources minister Jim Carr said Thursday that Ottawa is determined to see the Trans Mountain pipeline expanded, despite an interprovincial dispute on whether the project should go ahead.

“They have a right to protest, but should not be allowed to block access to the worksites. The rule of law must be upheld,” Kenney said. “Radical activists cannot be allowed to delay the approved Trans Mountain pipeline to death.”

Alberta and B.C. have been locked in a battle over the future of Kinder Morgan Canada’s $7.4-billion plan to triple capacity of the Trans Mountain pipeline, which runs from Edmonton to Burnaby.

LONDON (Reuters) – If the oil market has felt unusually quiet in recent weeks and months, that probably reflects the almost complete lack of sharp daily price movements.

While prices have soared by more than 40 percent since the middle of 2017, day-to-day volatility has fallen to its lowest level since 2014, with a relatively smooth and orderly upward adjustment in prices.

Short-term volatility has been trending downwards since early 2016 and in January fell to its lowest since August 2014.

The 20-day standard deviation of daily price moves expressed at an annualized rate — one common measure of volatility — dropped to only 13 percent in January from 80 percent almost two year earlier.

Volatility in early and mid-January was in the bottom fifth percentile for any 20-day period since the start of 1990.

The relatively sharp drop in oil prices at the start of February has since pushed volatility slightly higher, at least temporarily, but even that decline was relatively smooth.

Volatility is still only in the 28th percentile of the post-1990 distribution and is set to decline again if the market’s more recent calm is sustained.

There have been no significantly large daily price movements in Brent, up or down, since June 2017, which was the last time there was a daily move exceeding 2 standard deviations.

OPEC SHUNT

The last really abnormal price move, exceeding 3 standard deviations and nearing 4, was all the way back in November 2016, when OPEC announced that it had reached agreement on cutting production.

French mathematician Benoit Mandelbrot noted the average level of volatility in commodity prices, as well as other assets, is itself volatile (“The Variation of Certain Speculative Prices”, Mandelbrot, 1963).

Since OPEC and non-OPEC countries announced their declaration of cooperation in late 2016, the oil market has been in a mild state, and the absence of volatility has been especially pronounced in the past nine months.

Strong growth in global oil consumption has been accompanied by large upward revisions in forecast oil production.

Global oil inventories have shrunk sharply, but there is broad optimism that future production will grow fast enough to meet demand.

Record buying of futures and options linked to petroleum by hedge funds and other money managers has been matched by strong interest in short-selling and hedging from producers.

HIGH LIQUIDITY

The result is that market liquidity has been very high, with the accumulation of relatively large futures and options positions and heavy turnover inducing only modest price changes.

The critical question for traders and investors is whether this relatively suppressed level of volatility will continue. And if so, for how long?

The shift from mild to wild usually occurs abruptly and without warning. There isn’t usually a gradual transition from one state to the other.

Several risk factors could cause an upsurge in volatility in the next few months, including the unwinding of concentrated hedge fund positions, uncertainty surrounding future growth of U.S. shale production and macroeconomic risks to oil consumption.

Volatility could also come from within the market itself, in the form of flash crashes that arise from the positioning of market participants and do not need any external, fundamental trigger.

Periods of low volatility tend to breed complacency and excessive risk-taking among traders, which sows the seeds of their own demise.

While various risk factors can be identified in the current market, periods of low volatility can persist for a surprisingly long time.

The previous period of low volatility extended for more than two years, from mid-2012 to early 2015. The current mild phase has already lasted for almost 15 months, since the start of 2017, but it will not last forever.

]]>http://www.biocap.ca/oil-price-volatility-at-lowest-since-before-the-slump/feed/0Canada Weekly Rig Count Down 54 to 219 for Week Ending March 16, 2018http://www.biocap.ca/canada-weekly-rig-count-down-54-to-219-for-week-ending-march-16-2018/
http://www.biocap.ca/canada-weekly-rig-count-down-54-to-219-for-week-ending-march-16-2018/#respondFri, 16 Mar 2018 19:52:53 +0000http://www.biocap.ca/canada-weekly-rig-count-down-54-to-219-for-week-ending-march-16-2018/Canada’s drilling rigs went down by 54 to the current count of 219 actively drilling rigs according to data collected by Baker Hughes for the week of March 16th.

From one week ago, Alberta rig counts decreased by 30 to 157 and the Saskatchewan rig count decreased by 22 to 35.

Zargon Oil & Gas Ltd. (“Zargon” or the “Company”) (TSX:ZAR) (TSX:ZAR.DB.A) has released its 2017 fourth quarter and full year financial results. Previously, Zargon provided 2017 year end reserves, production updates and 2018 H1 production/capital guidance in our February 12, 2018 and November 13, 2017 press releases. Highlights from the fourth quarter and year ended Dec. 31, 2017 are provided below:

HIGHLIGHTS FROM THE FOURTH QUARTER AND YEAR ENDED DECEMBER 31, 2017

For calendar 2017, funds flow from operating activities of $5.99 million ($0.20 per basic share) was 67 percent higher than the $3.58 million ($0.12 per basic share) recorded in the prior year.

Calendar 2017 total production reflected significant 2016 property sales and averaged 2,531 barrels of oil equivalent per day, a 28 percent decrease from the prior year. Oil and liquids production averaged 1,974 barrels of oil and liquids per day in 2017. Natural gas production averaged 3.34 million cubic feet per day in 2017. Fourth quarter 2017 total production averaged 2,416 barrels of oil equivalent per day and was comprised of 1,924 barrels of oil per day and 2.95 million cubic feet per day.

Zargon’s 2017 funds flow from operations was $5.99 million, a 67 percent improvement over the prior year’s $3.58 million of funds flow from operations. For the fourth quarter of 2017 funds flow from operations were $1.59 million and compares with third quarter 2017 funds flow from operations of $1.76 million and fourth quarter 2016 funds flow from operations of $0.92 million.

Zargon’s 2017 net capital expenditures totalled $8.86 million and were primarily allocated to oil exploitation costs relating to facility, waterflood implementation and well reactivation expenditures. These expenditures consisted of $8.58 million of exploitation, development and facility expenditures and included $1.86 million of chemical costs for the Alkaline Surfactant Polymer (“ASP”) Little Bow project. During the year, Zargon drilled nil net wells. Zargon’s 2017 abandonment and reclamation costs totaled $2.11 million.

As at December 31, 2017, Zargon had $38.41 million in net debt, net of working capital. This total includes $3.53 million in working capital offset by $41.94 million of convertible debentures.

Three Months Ended December 31,

Year EndedDecember 31,

2017

2016

Percent Change

2017

2016

Percent Change

Financial Highlights

Income and Investments ($ millions)

Gross petroleum and natural gas sales

10.31

9.24

12

38.68

44.72

(14

)

Funds flow from operating activities

1.59

0.92

73

5.99

3.58

67

Cash flows from operating activities

0.29

(1.77

)

116

2.48

4.66

(47

)

Net loss

(3.55

)

(17.81

)

80

(9.31

)

(20.18

)

54

Field capital and administrative asset expenditures

2.41

1.42

70

8.65

6.92

25

Net property acquisitions/(dispositions)

0.04

0.01

300

0.21

(92.05

)

18389

Net capital expenditures/(dispositions)

2.45

1.43

71

8.86

(85.13

)

16140

Abandonment and reclamation costs

0.87

0.05

1640

2.11

0.08

2538

Per Share, Basic

Funds flow from operating activities ($/share)

0.05

0.03

67

0.20

0.12

67

Net loss ($/share)

(0.12

)

(0.58

)

79

(0.30

)

(0.66

)

55

Balance Sheet at Period End ($ millions)

Property and equipment (D&P)

128.91

137.48

(6

)

Exploration and evaluation assets (E&E)

1.74

2.23

(22

)

Total assets

140.55

169.39

(17

)

Working capital

3.53

24.00

(85

)

Convertible debentures at maturity

41.94

57.50

(27

)

Shareholders’ equity

22.72

32.23

(30

)

Weighted Average Shares Outstanding for the Period (millions) – Basic

30.77

30.58

1

30.73

30.50

1

Weighted Average Shares Outstanding for the Period (millions) – Diluted

The calculation of barrels of oil equivalent (“boe”) is based on the conversion ratio that six thousand cubic feet of natural gas is equivalent to one barrel of oil.

For further information regarding Zargon’s properties, reserves and net asset values, please refer to the Company’s corporate presentation, which is available at www.zargon.ca.

Strategic Alternatives Process

In 2015 Zargon formed a Special Board Committee (the “Committee”) to examine alternatives available to maximize shareholder value. Macquarie Capital Markets Canada Ltd. (“Macquarie”) is currently engaged as Zargon’s exclusive financial advisor. The Company continues to evaluate strategic alternatives available to Zargon which may include a sale of the Company or a portion of the Company’s assets, a restructuring of the Company’s current capital structure, the addition of capital to further develop the potential of the assets, a merger, a farm-in or joint venture, or other such options as may be determined by the Board of Directors to be in the best interests of the Company and its stakeholders.

Forward-Looking Statements

This press release offers our assessment of Zargon’s future plans and operations as at March 15, 2018, and contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “anticipate”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “should”, “plan”, “intend”, “believe” and similar expressions (including the negatives thereof) are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to our strategic alternatives process under the heading “Strategic Alternatives Process”. In addition, all statements relating to reserves, including ASP reserves, in this press release are deemed to be forward-looking as they involve an implied assessment, based on certain assumptions and estimates, that the reserves described, can be properly produced in the future.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: those relating to results of operations and financial condition; general economic conditions; industry conditions; changes in regulatory and taxation regimes; volatility of commodity prices; escalation of operating and capital costs; currency fluctuations; the availability of services; imprecision of reserve estimates; geological, technical, drilling and processing problems; environmental risks; weather; the lack of availability of qualified personnel or management; stock market volatility; the ability to access sufficient capital from internal and external sources; and competition from other industry participants for, among other things, capital, services, acquisitions of reserves, undeveloped lands and skilled personnel. Risks are described in more detail in our Annual Information Form, which is available on www.zargon.ca and on www.sedar.com. Forward-looking statements are provided to allow investors to have a greater understanding of our business.

You are cautioned that the assumptions used in the preparation of such information and statements, including, among other things: future oil and natural gas prices; future capital expenditure levels; future production levels; future exchange rates; the cost of developing and expanding our assets; our ability to obtain equipment in a timely manner to carry out development activities; our ability to market our oil and natural gas successfully to current and new customers; the impact of increasing competition; the availability of adequate and acceptable debt and equity financing and funds from operations to fund our planned expenditures; and our ability to add production and reserves through our development and acquisition activities, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them. The forward-looking information and statements contained in this document is expressly qualified by this cautionary statement. Our policy for updating forward-looking statements is that Zargon disclaims, except as required by law, any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Additional GAAP and Non-GAAP Financial Measures

Zargon uses the following terms for measurement within this press release that do not have a standardized prescribed meaning under Canadian generally accepted accounting principles (“GAAP”) and these measurements may not be comparable with the calculation of similar measurements of other entities.

The terms “funds flow from operating activities” and “operating netback per boe” in this press release are not recognized measures under GAAP. Management of Zargon believes that in addition to net earnings and cash flows from operating activities as defined by GAAP, these terms are useful supplemental measures to evaluate operating performance and assess leverage. Users are cautioned; however, that these measures should not be construed as an alternative to net earnings or cash flows from operating activities determined in accordance with GAAP as an indication of Zargon’s performance.

Zargon considers funds flow from operating activities to be an important measure of Zargon’s ability to generate the funds necessary to finance capital expenditures and repay debt. All references to funds flow from operating activities throughout this press release are based on cash provided by operating activities before the change in non-cash working capital since Zargon believes the timing of collection, payment or incurrence of these items involves a high degree of discretion and, as such, may not be useful for evaluating Zargon’s operating performance. Zargon’s method of calculating funds flow from operating activities may differ from that of other companies and, accordingly, may not be comparable to measures used by other companies. Funds flow from operating activities per basic share is calculated using the same weighted average basic shares outstanding as is used in calculating earnings per basic share. See Zargon’s Management’s Discussion and Analysis (“MD&A”) as filed on www.zargon.ca and on www.sedar.com for the periods ended December 31, 2017 and 2016 for a discussion of cash flows from operating activities and funds flow from operating activities.

51-101 Advisory

In conformity with National Instrument 51-101, Standards for Disclosure of Oil and Gas Activities (“NI 51-101”), natural gas volumes have been converted to barrels of oil equivalent (“boe”) using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. In certain circumstances, natural gas liquid volumes have been converted to a thousand cubic feet equivalent (“mcfe”) on the basis of one barrel of natural gas liquids to six thousand cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A conversion ratio of one barrel to six thousand cubic feet of natural gas is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion ratio on a 6:1 basis may be misleading as an indication of value.

Filings

Zargon has filed with Canadian securities regulatory authorities its financial statements for the year ended December 31, 2017 and the accompanying MD&A. These filings are available on www.zargon.ca and under Zargon’s SEDAR profile on www.sedar.com.

About Zargon

Zargon is a Calgary-based oil and natural gas company working in the Western Canadian and Williston sedimentary basins and is focused on oil exploitation projects (water floods and tertiary ASP) that profitably increase oil production and recovery factors from existing oil reservoirs.

In order to learn more about Zargon, we encourage you to visit Zargon’s website at www.zargon.ca where you will find a current shareholder presentation, financial reports and historical news releases.

The approved plan calls for the TransCanada Corp. subsidiary to remove a nine kilometre section of the pipeline running through the Sturgeon Lake Cree Nation Reserve Land and leave the rest of the pipeline segments in place.

The NEB says this was the largest proposal to abandon a facility ever considered by the regulator.

TransCanada indicated in its application that the section of pipeline running north-south about 34 kilometres west of Peace River, Alta., is no longer needed and customers will be served by other pipelines in the network.

The NEB says the company will be liable and accountable for monitoring and maintaining the pipeline in a safe and environmentally sound manner for as long as it remains in the ground.

The company said in its application that the cost of project is estimated at $29.7 million.

NEW YORK (Reuters) – Oil prices dipped on Wednesday in choppy trade, as a bigger-than-expected U.S. crude stock build pressured prices, but large draws of fuel stocks provided some support.

U.S. crude stocks rose by 5 million barrels, the biggest jump since late January, the U.S. Energy Information Administration (EIA) said. Expectations had been for a 2 million barrel build. The effect was offset somewhat by a larger-than-expected draw on fuel stocks.

“I don’t think we have a clear set of directions, and I don’t think this (EIA) report gives that much of an insight as to whether the rebalance continues or not. We continue to just chop around here,” said Gene McGillian, manager of market research at Tradition Energy.

Brent crude oil futures were down 18 cents to $64.46 per barrel by 12:45 p.m. EST (1645 GMT), while U.S. West Texas Intermediate (WTI) futures were down 9 cents at $60.62 per barrel.

“We’re not pressuring the downside that much. Of course, the reason is because we had some unexpectedly large draws in distillates and gasoline that, when added together, are two times bigger than the crude build,” said Bob Yawger, director of energy futures at Mizuho.

OPEC said in its monthly report that supply from non-members is likely to grow by 1.66 million barrels per day (bpd) in 2018, almost double the growth it predicted in November, largely due to rising U.S. supply.

The Organization of the Petroleum Exporting Countries also said oil inventories across the most industrialized countries rose in January for the first time in eight months, a sign the impact of its output cuts may be waning. OPEC trimmed its 2018 demand forecast for its own crude by 250,000 bpd to 32.61 million bpd, the fourth consecutive decline.

Commerzbank strategist Carsten Fritsch said that “according to the OPEC report, demand for OPEC’s oil must be 33 million barrels per day for the rest of the year to get rid of any remaining oversupply.”

Oil prices got a boost early in the session from a broader investor push into commodities after Chinese data showed industrial production in the world’s largest importer of raw materials grew more than expected over the first two months of the year.

Oil may also soon get some support from seasonal demand.

“We are now only two to four weeks away from when weekly oil inventory data will start to draw again which should be supportive for oil prices,” SEB commodities strategist Bjarne Schieldrop said.

Garneau was in Vancouver speaking to the Chamber of Shipping today and says a pilot project is being launched this fall under the $1.5-billion oceans protection plan to help Indigenous communities monitor vessel traffic.

The project is being launched in 10 communities including Haida and Gitga’at Nations on British Columbia’s north coast to test and develop new maritime awareness information systems.

Garneau says $1.2 million has also been awarded to Aqua-Guard Spill Response Inc. of North Vancouver for equipment to support the coast guard in spill clean-up.

The announcement comes days after thousands of people in B.C. protested the expansion of the Trans Mountain pipeline, which would increase tanker traffic to the Burrard Inlet.

Garneau says the pipeline expansion has already been approved by the federal government, and while it doesn’t have unanimous public support, the majority of Canadians want to see it built.

LONDON (Reuters) – Hedge funds have resumed liquidating their bullish long positions in crude oil and refined fuels amid more signs that the earlier rally in prices has fizzled out.

Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum prices by 50 million barrels in the week to March 6.

The reduction largely reversed an increase of 68 million barrels the previous week, according to position records published by regulators and exchanges.

Portfolio managers have now reduced their net long position in petroleum in five of the last six weeks by a total of 245 million barrels since Jan. 23.

The most recent week saw a reduction in net length in NYMEX and ICE WTI (-17 million barrels), Brent (-5 million), U.S. gasoline (-10 million), U.S. heating oil (-5 million) and European gasoil (-13 million).

Some of the froth has blown off the market in the last six weeks but the hedge fund community still has a very bullish bias towards oil prices.

Fund managers hold a net long position in the six major petroleum contracts amounting to 1,239 million barrels of oil, a level of bullishness that had never been seen until four months ago.

Long positions still outnumbered short positions by a ratio of 10:1, down from a peak of almost 12:1 in January, but again a level of bullishness that was unprecedented until this year.

With so many long positions already established, and few remaining short positions to cover, oil prices have struggled to rise further in recent weeks.

Instead the market has seen a slow but steady liquidation with existing longs cut by a total of almost 250 million barrels (15 percent) since Jan. 23.

It remains uncertain whether this is merely a pause and the price rally will resume shortly, or whether it marks a temporary peak, with more liquidation and price falls to come.

But the balance of risks remains tilted towards the downside in the short term given the huge number of long positions still hanging over the market.